Currently, China represents the best opportunity for growth of pork imports

UTRECHT, THE NETHERLANDS — Global pork prices posted sharp declines as strong growth in supplies of pork outpace demand, Rabobank said in its Pork Quarterly Q2 2015 report.

Rabobank noted that the pork industry has rebounded from losses caused by an outbreak of porcine epidemic diarrhea virus (PEDv). In 2014, hog producers in many regions reaped favorable profits in 2014 as global pork supplies dropped because of PEDv. Currently, pork prices dropped nearly 40% from historic highs reached in 2014, according to Rabobank.

Currency wars are compounding the problem and changing competitive positions among pork-producing countries, the report said.

“Combined with relatively high stocks in key importing countries, the continued trade-disrupting effect of the Russian import ban on some western exporting countries and strong exchange rate movements have resulted in price pressure in most exporting countries and varying price developments in importing countries,” Rabobank said in its report.

The United States, Russia and Brazil are key drivers behind the robust growth in supplies of pork. In the U.S., the lower-than-expected impact of PEDv is expected to encourage herd expansion which will challenge prices, Rabobank said. Exports will be difficult with a stronger U.S. dollar.

The outlook for supply growth in Brazil remains positive. Rabobank expects both domestic consumption and exports to gain momentum in the second quarter. But developments in the Russian market along will determine final price and margin levels.

Currently, China represents the best opportunity for growth of pork imports, Rabobank said.

“The slight recovery of piglet, hog and pork prices from mid-March onwards will be further supported by the large drop of both YOY [year-over-year] hog (-10%) and YOY sow (-18.5%) herds in February,” Rabobank said. “The expected rise in pork prices will offer opportunities for considerable import growth in [the second half] of 2015.”